Atherton v T M Building Consultants Pty Ltd; T M Building Consultants Pty Ltd v Atherton

The Builder's Evidence

1. The builder filed and served the following evidence which it relied upon during the hearing;

• Expert Report prepared by Scott Whitton dated 6 June 2011.
• Expert Report prepared by Anthony Beencke dated 20 September 2011.
• Further Expert Report of Scott Whitton dated 15 October 2012.
• Expert Report of Anthony Beencke dated 14 November 2012.
• Affidavit of Tony Macri, affirmed 16 November 2012.[Ex M3]
• Drive-by valuation by Jason Field dated 2 October 2013
• Affidavit of Tony Macri affirmed 16 October 2013 [Ex M4]
• Affidavit of Tony Macri affirmed 14 November 2013 [Ex M5]
• Valuation by Jason Field dated 11 November 2013.

The Owners' Evidence

1. The owners have filed and served the following evidence on which they relied;

• Witness Statement of Trevor Atherton dated 19 August 2013
• Witness Statement of Trevor Atherton of 8 January 2014.
• Witness Statement of Marce Marigianoof dated 11 July 2013.
• Witness Statement of John Cairns dated 15 August 2013.
• Expert Report of David Kelly dated May 2012
• Expert Report of David Kelly dated 7 July 2013.
• Valuation by Theo Stamoulis dated 11 July 2013
• Expert Report of Bruce Harris dated 15 July 2013.
• Expert Report of Steve Alexander dated 30 July 2013

1. At commencement of the hearing the builder's claim was $88,475.25 and the owners' claim was $269,590.21 all as set out in a joint Scott Schedule which was introduced at the start of the hearing.
2. The Scott Schedule identifies 31 items which are set out on pages 1-5, pages 6-20 sets out detailed breakdowns of each of the issues which the builder submitted are as follows; 1. The value of works comprising variations 5 & 6 (item 12) 2. The value of 'negative variations' - work not carried out by the builder (item14) 3. The owners' claim for incomplete and defective works which they have completed or rectified (item 17A). 4. The owners' claim for incomplete work that is yet to be completed (item 17). 5. The owners' claim for defective work yet to be rectified (item 18) 6. The owners' claim for damage to an adjoining property (Item 19) 7. The owners' claim for cost/diminution in value due to the absence of Warranties (item 27) 8. The owners' claim for costs/diminution in value arising from the builder's failure to provide As Built Plans (item 28) 9. The owners' claim for cost/diminution in value arising from the builder's failure to provide Certificates (item 29). 10. Damages for delay (item 31).

The Building Contract

1. The documents which formed the basis of the building contract are referred to in the architect's tender invitation of 20 November 2009. These documents and conditions were ultimately incorporated in the building agreement between the parties.
2. The tenderers were invited to submit their prices for construction and completion of works described and time to complete except for roof windows which were excluded from the tender.
3. The documents consisted of the following;

• Survey drawing.
• Basix Certificate.
• Architectural Drawings ATHB-01 to ATHB-07 on A1.
• Architectural Drawing s ATHB-08 to ATHB- 10on A3.
• Architectural Specifications.
• PC Adjustment Schedule (included in the architectural specification)
• Structural Plans 557-S01 to 557-S10 (to be sent later as an addendum)
• Hydraulic Plans H-CC-00 and H-CC-01 (to be sent later as an addendum) Landscape drawing.
• Council DA Conditions.
• Arborist Report
• 3D Views
• The form of contract was to be Office of Fair Trading Home Building Contract which was extensively modified by the respondents by the inclusion of fourteen pages of "Supplementary Conditions of Contract". In essence the builder was required to;
• Bring the building works to a stage which will allow the PCA to issue the certificate of occupancy.
• Bring building works to the stage described above within an agreed contract time.
• No extensions of time were to be allowed (except for inclement weather and client initiated variations to the design).
• The builder was to assume the risk for any things that may happen (except for variations to the design required by the proprietor.
• The builder was required to provide certificates and quality control reports from suitably qualified professionals where required and to achieve a Certificate of occupancy.
• In addition the builders were invited to submit with their tenders a "benchmark building" which, if agreed by the proprietor would be the benchmark and standard of quality for any items not covered by the relevant documentation.

1. Only 2 tenders were received by the closing date and both exceeded the budget expectation. Neither tender was submitted in the required form, identifying Stages A and B.
2. Mr and Mrs Atherton decided to continue with the project but limit it to stage B work which Mr Atherton describes as "…essential to our special family needs and what could be desirable extras." (Statement of Trevor Atherton para 30). Mr Atherton had taken 6 months leave to deal with the building works.
3. Stage B work was identified by reference to a red line drawn on the plans by Mr Atherton bisecting the length of the house. The red line separated the 2 stages of the work. Stage A, can be identified on the plan as extending from the street frontage of the house to a little over half the length of the house. It was to be constructed at some future time. Stage B from the red line to the rear boundary would proceed in modified form in order to meet the budget.
4. Negotiations took place between the owners and the builder which resulted in an agreement reflected in the contract documentation.
5. The contract was signed on 15 January 2010 at a reduced, negotiated contract sum of $508,000.00.
6. Work commenced on 3 February 2010. Disputes quickly emerged in relation to the Supplementary Conditions, the extent of contract documentation provided to the builder, variations and the scope of the works included in Stage B.
7. The owners terminated the building contract on 15 January 2011 after the builder had commenced action in the Tribunal to recover moneys which he alleged were due to him under the contract.
8. It is common ground that the contract was varied and the variations were assessed by building experts and quantity surveyors, appointed to assist the Tribunal by each of the parties.
9. The parties had agreed by the start of the hearing that the Contract sum (exclusive of GST) was $461,818,18.
10. In order to bring the issues into focus the parties agreed to deductions of Provisional Sums to the value of $51,633.75 and prime cost items to the value of $112,124.25 plus the cost of excavation paid for by the builder as a provisional sum adjustment of $16,859.09.
11. It was common ground that the adjusted Contract sum (Scott Schedule Summary) was $314,919.27 (exclusive of GST).

Contract Variations

1. During the interlocutory phase of these applications a number of variations were agreed between the experts or the parties.
2. The following variations were agreed; Variation 1 $ 1,363.64 Variation 2 $ 5,538.18 Variation 3. $ 1,606.36 Variation 4. $42,000.00 Variations 5 & 6 & 7 were disputed. The respondents(Mr & Mrs Atherton), through consultants engaged by them as experts in the proceedings calculated the value at $6,058.50 and the Applicant (T M Building Consultants Pty Ltd) also through experts engaged by it calculated the variations at $8,515.82.

The Value of Works comprising Variations 5 ,6 & 7

1. It has been submitted on behalf of the owners that variations 5, 6, & 7 are claims for additional payments and therefore the builder has the onus of proving its claim.
2. The owners have quantified the disputed variations 5 & 6 at $6,058.50 (ex GST). The builder's quantification is $8, 515,82 also ex GST.
3. These variations are in a number of parts and the costings have been developed by quantity surveyors having similar experience and qualifications. A significant difference between Messrs Beencke and Kelly is that the former with the building expert Whitton attended the dwelling within a relatively short period of the contract termination and before the rectification works had been put in hand.
4. Mr Kelly, on the other hand, did not attend upon the site for some 15 months after the contract termination and after the work had been rectified/completed.
5. Mr Kelly, in para 8.2 of his report fairly acknowledges the condition of the works at his first site visit indicating that "the rectification works have now been completed and any rectification works have been covered up…" causing him to rely on descriptions and photographs provided by Mr Atherton.
6. It has been submitted that in the event of a conflict between the experts in relation to the state of the works at termination that I should prefer the evidence of Messrs Whitton and Beencke because of their first hand appraisal of the works.

Variations

1. It has been submitted on behalf of the owner that since the builder has failed to comply with the contract regime for "variations" it should not be entitled to claim any additional payments in respect of these items.
2. However, some amounts have been allowed by the owners as concessions and some have been agreed by the experts in conclave. I do not propose to recite the arguments in relation to these items which, except for item 26 are relatively minor costs in relation to the quantum of the owners' claim.
3. The builder has claimed the sum of $7,995.50 excluding margin and GST.
4. The owners have conceded a sum of $6,058.50 excluding margin and GST.

Changes to the Scope of Works (items 86-94)

1. There was an agreement at the hearing in relation to item 14 in the sum of ($13,789.20). Being negative variations they represent a credit to the owners.
2. Item 14 is referred to in the owners' primary submissions dated 3 March 2014 at paragraphs 43-44; paragraph 43 acknowledges the agreement in relation to item 14.
3. It appears from the builder's submission that there has been confusion between the spa and the spa pool and shower. As a consequence the builder has contended that there is double dipping in relation to this item.
4. The spa pool shower was not constructed by the builder nor has it been subsequently constructed by the rectifying/completing builder.
5. The Spa heating system has been completed by the rectifying builder and is dealt with in Item 17A.
6. It is referred to in Architectural Drawing ATH B01 Ground Floor Plan: note (at corner of the spa - "Aussie Premium outdoor shower from Rainware (or similar) installed as per manufacturer's specs" and in [ExTCA1 page 319] Summary of Costs and Adjustments to completion at 10 December 2010.

Item 17 Remaining Items to be Completed at August 2013

1. Mr Atherton has identified the remaining items to be completed at para 936 of his Statement of 19/08/13,as Scott Schedule items 102,107 &113 which he has tabulated at para 3.
2. The outstanding items are drawn from the Lucrum Report and references from that report are included, they are; Item 102. INC 5. Macrender and paint wall under external stair. Item 107. INC 10. Install garbage chutes. Item 113. INC 16. Supply and install gyprock enclosure to exposed pipes and wiring.

Discussion and Findings

1. It is not in dispute that Clause 25 of the contract under the heading "Termination of the contract by owner" includes; If the owner terminates the contract due to the fault of the contractor, any unfixed materials or fittings he site may be retained by the owner. Following the issue of a notice by the owner under this Clause… If the reasonable cost of completion of the work exceeds that which would have otherwise been due under the contract the difference will be a debt payable by the contractor to the owner. Should the reasonable cost of completion be less than otherwise due under the contract the difference will be a debt payable to the contractor, Until completion of the work the contractor will not be entitled to any further payment under this contract. However, nothing contained in this clause may take away any right the contractor may have to payment under the dispute resolution Clause 27.
2. The builder commenced proceedings for recovery of $90,600.32 on 20/10/2010, prior to the termination of the contract by the owners and prior to the owners filing their claim in the Tribunal.
3. I have formed the view that in those circumstances the builder is not kept out of his money until completion of the works.
4. I note that the works are still incomplete. The filing of the builder's claim in the Tribunal was a natural consequence of the dispute resolution clause in the contract and was consistent with the contractor's right to payment under that clause.

Variations 5 & 6

1. In relation to variations 5 & 6, I note that they are an amalgam of smaller variation items which appear as items 39 -53 and 55-63 of the Scott Schedule.

Item 39 Gyprock wall and ceiling lining.

1. It is noted in the owner's submissions that the experts are only $50.00 apart on this item and they have offered to concede half the difference and agree to allow $375.00 exclusive of GST. I accept that proposal as the most economical way of disposing of the item and find the sum of $375.00 as the reasonable cost of this work.

Item 40 Paint James' bedroom

1. The experts agreed $450.00 and I find that as the appropriate cost.

Item 41 TM Labour to remove rock around the lift opening and the stair wall in basement

1. The experts agreed the sum of $450.00 and I make that finding.

Item 42. TM labour to remove demolished bricks and construct wall under slab

1. The owners have submitted that the demolition and reconstruction of the wall adjacent to the rainwater tanks is part of the demolition works and have referred me to Architectural Drawing ATH B02 Garage Plan. The relevant works are shown hatched and annotated "Demolish ex wall to eng details" and also "Demolition construction and underpinning to eng details".
2. I note that no underpinning was required because of the presence of rock but I am satisfied that the clear intention of the drawings was that the brick wall should be demolished.
3. Furthermore I have been taken to the Specification at page 54 Demolition Garage level; Wall under existing veranda "Section 02050 DEMOLITION MATERIALS" Item material required to be demolished becomes the property of the contractor. Remove it from the site.
4. There is agreement between the experts that the wall is to be constructed but they are $200.00 apart on the cost. I accept the costing by Mr Beencke and find the cost of the work to be $400.00 accepting that the builder was required to remove the demolished material from the site, I do not accept that the work is a contract variation but I accept the owner's concession at $200.00.

Item 43. Mac render blue board wall on side laneway

1. The experts have agreed $2,000.00 and I accept and find that sum.

Item 44. Renderers to cut Ashlar lines into new Mac Render as requested

1. Two issues arise in relation to this claim. The first that Mr Atherton thought that the cutting of the lines was part of the previous variation, and the second that In Mr Atherton's words "a fair portion of the work would be included in the existing contract…" that is it is asserted that the work which is behind the "red line" should be included and is required to match existing. I am not persuaded by that assertion. The work is clearly in a finish applied to a different material and, in my view, it would not be a normal expectation that lines would be engraved in a mac render finish over blue board sheet as a matter of course.
2. I take the view that the work is a variation and find that the cost of executing the instruction is $250.00 as claimed by the builder.

Item 45. Owing from Garage Render

1. I accept the builder's position that notwithstanding the assertion by the expert Kelly there is no evidence that the garage was to be internally rendered. Mr Atherton does not claim the work as incomplete and in his statement dated 19/8/13 at 5/158 he canvases the possibility of savings that might be gained by "…not rendering or painting the internal garage walls. I can find no further evidence of a decision in relation to this item but on the balance of probabilities I find that the requirement to render the garage walls was removed from the contract and as a consequence the builder's claim must fail in relation to this item.

Item 46. Mac Render Blueboard to Side Laneway

1. This item was agreed at $800.00. I find in that sum.

Item 47. Supply 3 Ceiling Roses and install 2

1. This item was agreed at $325.00 I find in that sum.

Item 48. Supply and Install Access Panel and Paint

1. Agreed item at $180.00 I find in that sum

Item 53 Plumber to Re-divert and Make New Connections to Sewer near Rainwater Tanks

1. I refer to TCA6 appendix E - Hydraulics Plan. I note that both experts Kelly and Beencke have interpreted the plan notes in different ways. I have adopted Mr Kelly's opinion as the reasonable inference to be drawn from the note concerning the re-diversion and dismiss the builder's claim for this item.

Item 55 Carpenter-Install 4 lift doors

1. Agreed at $325.00 and I find in that sum.

Item 56 Paint doors

1. Since the provision of the doors is an agreed variation the painting of those doors is also a variation. The builder has agreed in the interests of fairness that $270.00 can be allowed and I find in that sum.

Item 59 Supply of 20 pairs of Stainless Steel Hinges

1. The item relates to the provision made on p92 of the specification [TCA tab 3page 92] under the heading Door Hardware - "Install door hardware provided by owner." There is no provisional allowance for door hardware but I have formed the view that the specification intention clearly calls for the builder to install only items of hardware provided by the owner. I accept that the supply has been made by the builder and that it is entitled to recover the cost of the supply of that item in the sum of $280.00.

Item 60

1. The item is agreed at $410.00 in relation to an overcharge for "stormtech" drain in lower bathroom. I find that sum.

Item 12. Summary of Adjustments (Variations) Item Allowance 39 $ 375.00 40 $ 450.00 41 $ 450.00 42 $ 200.00 43 $2,000.00 44 $ 250.00 45 $ 0.00 46 $ 800.00 47 $ 325.00 48 $ 180.00 53 $ 0.00 54 $ 300.00 55 $ 325.00 56 $ 270.00 59 $ 280.00 60 $ 410.00 Total Ex GST $ 6,615.00

Changes to the Scope of Works (items 86-94) Variation 8

1. I note the agreement reached at the hearing and find that it did not include an allowance for the spa shower connection in item 86.
2. On the evidence of the owners I find that the spa shower has been omitted from the works and that evidence is not contradicted.
3. I find that the allowance made by the experts in the sum of (-$13,789.20) accurately reflects the value of the deleted work referred to in this Variation which is a negative adjustment.

Item 17A-Actual Completion and Rectification Costs

1. In order to give effect to the requirements of Clause 26 of the Contract it is necessary to determine the actual cost of work executed by the owners, in this case since all of the alleged defects rectification costs and completion costs have not yet been incurred, the reasonable cost of those works.
2. It is trite law that the owners' costs of rectification and completion actually incurred will be the cost of the work.
3. The applicable principle is that stated in Banco de Portugal v Waterlow & Sons Ltd [1932] AC452 at 506 per Lord Macmillan, as cited in Segenhoe Ltd v Atkins (1990) 29 NSWLR 569 at 582; Sachar Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976]1 NSLWR5;Wenkart v Pitman (1998) NSWLR 502; MacGregor on Damages 15th Edition par 311; TC Industrial Plant PtyLtd v Robert's Queensland Pty Ltd (1963) 180 CLR 130 at 138;
4. In an oft quoted passage His Lordship said; When the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures that he may be driven to adopt ought not to be weighed in the nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the costs of such measures merely because the party in breach can suggest that other measures less burdensome to him may have been taken.
5. The owner's claim at the hearing was $83,113.15 which is supported by Invoices and other materials contained in Mr Atherton's first statement (3 March 2014 [ExTCA1 at paragraphs 763-884and 931ff].
6. Prudently Mr Atherton called tenders for the completion/rectification work and engaged, on a cost plus basis the tenderer who submitted the most appropriate proposal.
7. Tenders were called on a scope of works described as "Works to Complete…" at pp 408,409 and 410 of ExTCA dated 19 08 13.
8. The General Scope of Works was "To complete the works according to the plans and specifications." (provided as a pdf)
9. The note following the general scope and itemised list was to the effect that the scope was not exhaustive. "All incomplete work is to be completed. Variations may be required. Further items may be identified in the course of the work and these can be on an hourly or additional quote basis."
10. The successful tenderer was Mirabella Building Service which is a trading name for M & J Marigliano.
11. Detailed labour and materials invoices were provided together with a summary sheet setting out the expenditure for materials and for the labour performed by Mr Marigliano.
12. Mr Beencke's evidence was that some of the rectification work carried out by Mr Marigliano could have been carried out at a lesser cost, however it is submitted by the owners that falls well short of establishing that Mr Atherton's process was unreasonable.
13. I find that the rectification procedure adopted by Mr Atherton for the owners was entirely reasonable and meets the principle set down in Banco de Portugal v Waterlow & Sons Ltd.

Item 17 Remaining Items to be Completed at August 2013

1. Mr Atherton has identified the remaining items to be completed at para 936 of his Statement of 19/08/13,as Scott Schedule items 102,107 &113 which he has tabulated at para 3.
2. The outstanding items are drawn from the Lucrum Report and references from that report are included, they are; Item 102. INC 5. Macrender and paint wall under external stair. Item 107. INC 10. Install garbage chutes. Item 113. INC 16. Supply and install gyprock enclosure to exposed pipes and wiring
3. The cost to complete these items was agreed at -$3,071.00 and I find for the owners in that sum.

Item 18 Remaining unrectified Defective Works

1. At August 2013 the following items remain to be rectified. ITEM No, Lucrum Defect Description Reference 132 D-1 Cut & Render top blade wall. 133 D-2 Rectify external stair. 134 D-3 Rectify falls to grated drains. 135 D-4 Rectify cracks to corners all openings. 136 D-5 Rectify skirting tiles at first floor balcony. 137 D-6 Flashings roof gutter falls & loose screws. 138 D-7 Gurney render off roof sheets. 139 D-8 Efflorescence to boundary walls. 140 D-9 Seal timber doors. 141 D-10 Kauri floor defects 142 D-11 Concrete soffit 143 D-12 Pond defects 144 D-13 Planter defects. 145 D-14 Insulation & sarking to balcony roof 146 D-15 Balcony floor insulation. 147 D-16 Defects slab behind spa. 148 D-17 Common wall &column leaking at garage. 149 D-18 Sewer defects. 150 D-19 Stormwater defects 151 D-20 Extent of rectification - Issue. 151A Reduced garage height.
2. The cost of rectification of items 132,136,137 (and 93), 138, 140, 142, 145, 149 and 150 were agreed either during the various conclaves or at the hearing during the concurrent evidence of the experts in the sum of $22,772.80. I find for the owners in that sum.
3. Items 139 and 148, were agreed within $50.00 by the experts Beencke and Kelly at, respectively $450.00 or $400.00 and $3,504.00. Following the process adopted previously when the quantity surveyors evidence was so close as to be almost equal I have allocated $425.00 to the treatment of efflorescence and accept the estimates for treatment of the leaks which are showing at the base of the garages level columns.
4. It has been submitted by the owners that I should accept the estimate by Mr Alexander. Mr Alexander's report in relation to the defects appears to be a critique of the other expert's views more in the nature of an assessment or determination than an expert report. In relation to this item he contends that neither expert has correctly identified the source of moisture penetration that has given rise to the efflorescence in the garage. He reports on his extensive moisture testing but gives neither locations or numbers of tests carried out or the levels of moisture recorded as a result of his "Protometer MMS" testing.
5. I have formed the view that Mr Alexander's report on this item and others falls short of the requirements for expert evidence and I reject it in favour of the opinions of the building experts and costing by both quantity surveyors at $3,909.00.

Item 141 The Kauri Flooring

1. The experts are in agreement as to the costs of either rectification by taking up the boards and re-laying or in the alternative rectification procedure taking up the flooring and replacing it with new boards.
2. Evidence was received from Mr Brian Harris a timber consultant with the Australian Timber Flooring Association (AFTA). Mr Alexander has acknowledged Mr Harris's particular expertise in the area of timber flooring and its performance and defers to that expertise, he nevertheless expresses his opinion on which of the methods of treatment of the flooring considered by Mr Harris should be adopted and concludes that it would not be "unreasonable" to replace the flooring.
3. I take the view that Mr Alexander is not offering an expert opinion in making such a determination but is either advocating on behalf of his client or reaching a conclusion based upon his understanding of the evidence in accordance with Mr Atherton's instructions in relation to the manner in which Mr Atherton says the material was handled when it was delivered to the site.
4. Mr Marigliano, the rectifying builder, gave evidence to the effect that the boards were badly marked, cupped and had already been sanded and polished. His view was that the only way to fix the problems was to remove the boards and install new ones.
5. Mr Marigliano is not giving unbiased opinion evidence but rather the evidence of the person who will be in the position of warranting the work done. It is perhaps natural that he would advocate for the proposal that gives him most control of the rectification works and also the best return for the risk which he assumes. I reject Mr Marigliano's opinion evidence and I am also reluctant to accept his factual assessment because it provides the basis for his recommendation to renew the flooring.
6. Returning to Mr Harris's evidence. He notes that the boards were about 80 years old when purchased by the owners. He notes that much of the flooring in the house is original and exhibits similar characteristics to those which are the subject of this complaint by the owners. He also observes that the owners' intention was not to match the existing flooring but to achieve the standards which could be anticipated in the event that new timber flooring was installed.
7. Mr Harris is cautious in his assessment and has observed that flooring laid on joists will be subject to different moisture conditions than could be achievable in situations where the flooring is laid on a sub-base over concrete where the effects of the curing of the concrete may result in different/higher moisture levels being imparted to the boards. Mr Harris has also observed that the sandstone walls of the house may have some effect on the moisture levels in the flooring which will in turn influence the degree of cupping, growth or shrinkage of the boards.
8. Two alternative rectification methods are reviewed by Mr Harris. He has avoided making a recommendation in favour of either. His advice is if the rectification proceeds it should be discussed with the installer and consideration should be given to his, (the rectifying contractor's) recommendation.
9. It can be implied from Mr Harris's report that he anticipates the same problems occurring again because of the micro environmental factors which pertain in the house. The old flooring (that is the existing floor) is exhibiting the same characteristics as the new (that is the 80 year old flooring) flooring. It does not require the application of too much imagination to conclude that repeating the process and installing new flooring will ultimately produce the same result other things being equal.
10. It is appropriate in relation to this item as well as the claim in respect of the garage roof slab, to be addressed below, to consider the law in respect of defects which do not diminish the value of the property.
11. The starting point of this examination is Bellgrove v Eldridge [1954] HCA 36 (1954) 90 CLR 613 (20 August 1954). The High Court confirmed that the measure of damages recoverable by the building owner for a breach of a building contract is the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract.
12. The formulation was subject to the qualification that the work undertaken must be "…a reasonable course to adopt, as well as being necessary to produce conformity."
13. The question which has exercised my mind is whether or not the course of removing the boards and replacing them with new (that is different 80 year old boards) is likely to produce conformity with the owners' objective.
14. My response is that on the balance of probabilities it is not because the boards will be subject to the same site conditions although it must be conceded not the same building site conditions. The expert evidence is that the boards will move, they may move less or they may move more. In those circumstances I cannot conclude that the course sought by the owners is reasonable.
15. That does not preclude, in my view the alternative approach suggested by Mr Harris, that is removal and re-dressing the boards for re-installation on the basis that they will be stabilised, if they were not previously, having been in place since the end of 2011. The allowance agreed by the expert quantity surveyors in conclave was $ 4,110.00 and I find for the owners in that sum.

Item 146 Insulation to Balcony floor

1. The item arises out of a BASIX requirement and it is common ground that the failure to install the insulation is a defect.
2. The experts agreed after consideration of the evidence by Mr Alexander that the cost of the work would be increased over that estimated by Mr Kelly taking account of the tessellated tile finish on the balcony floor.
3. Mr Alexander calculated the cost at $6,400.00 which was agreed by the other experts during concurrent evidence. I find for the owners in that sum.

Item 150 Stormwater Defects

1. At the hearing it was agreed that this was an item of defective work and the cost of rectification was also agreed at $5,000.00. I do not propose to give further consideration to this item in the face of the agreement reached and I find for the owners in the agreed sum of $5,000.00.

Item149 Sewer Defect. Failure to provide boundary trap

1. This was also agreed at the hearing to be a defect, the agreed cost of rectification of which was $5,350.00. I find for the owners in the agreed sum of $5,350.00.

Item 151A Reduced Garage Height

1. This is possibly the most complex and significant of the defects claimed by the owners.
2. Put simply the owners submit that they found this defect between two and three years after the builder left the site and as a consequence they have classified the defect, if it be one, as "latent".
3. The defect is claimed as the builder's failure to construct the soffit of the garage roof (slab of the external deck over the garage) with a 1% rake rising towards the opening at the roller shutters of the garage entrance to the Lane which gives vehicular access to the property.
4. Mr Atherton's evidence at 255 of his first witness statement says that the architectural drawing Sheet ATHBO3 Section AA, initialled by the builder shows a fall of 1% from the access lane.
5. Mr Atherton surmises that "Mr Macri would certainly have realised his mistake by the time he did the garage floor and stormwater drainage in August 2010 and found the levels and clearances so tight."
6. Mr Atherton says "We discovered it only recently when it was confirmed in the final survey report…Before we had assumed the disappointing outcome on garage height was an unavoidable design problem or design constraint."
7. The initial claim sought to rely on a diminution in value of the residence as a consequence of the loss of head height at the garage entrance but that was dropped and the owners are proceeding on the basis of the builder's breach of contract or breach of Statutory Warranties.
8. The builder has observed that this defect was identified by the owners 2 years after the commencement of the builder's proceedings to recover money under the contract and 18 Months after the commencement of owner's proceedings against the builder.
9. The builder has submitted that the owners have demonstrated throughout their conduct of the building works …an immense capacity and propensity for attention to detail. So much is amply clear from the owners' detailed notes, records and recounting in their witness statements relating to:

• The factors, circumstances and events leading to their decision to acquire the property,
• The tender process leading up to the invitation to the builder to tender for the works.
• The sequence of events leading up to the builder entering the contract.
• The records they kept of every aspect of the works whilst the contract was alive.
• The termination of the contract
• All matters relating to the remedying and completion of the builder's defective and incomplete works.

1. The builder has asserted that it is improbable given the above behaviour that the owners have only "recently discovered" the defect or that they have manufactured the problem to bolster their claim against the builder.
2. It is correct that the owners' claim is extraordinarily detailed and I accept that it is improbable that this defect has recently come to light, one of the bases for the claim is that access to the garage by Mr And Mrs Atherton's son has been hampered by the height of the access to the car park for his van. Surely this would be apparent almost immediately. The defect is patent rather than latent but that does not remove the builder's responsibility to rectify. It does however bring the issue of reasonableness of the method of rectification sharply into focus.
3. It is the case that the height of the garage as established by survey is in part less than the plans require and I so find.
4. Mr Alexander has provided a thorough analysis of the defect and its effect on the garage area of the property including a consideration of the effects of the geometry of the soffit as it is affected by the splay of the lane boundary which he says is likely to create difficulties with the installation of the roller shutters due to the creation of sloping door heads.
5. Mr Alexander has also considered the partial demolition of the roof slab as an alternative to complete demolition of the Garage roof slab to the transverse beam including the planters and terrace above. His preliminary cost estimate is in excess of $100,000.00 which he considers "unreasonable in the circumstances". I will not repeat my earlier comments on the role of the expert in reaching such a determination however it is necessary to canvass the question of "reasonableness" raised earlier in relation to the timber flooring.
6. I have already referred to the decision in Bellgrove & Eldridge and the qualification of reasonableness which the Court placed upon the work necessary to produce conformity with the design documentation or intent.
7. The builder has referred to South Parklands Hockey & Tennis Centre Inc v Brown Falkiner Group Pty Ltd [2004] SASC 81 where DeBelle J. observed; It is well established that a court will not order damages for rectification where the proposed remedial work is not a reasonable Course to adopt…One example is where the expenditure on the proposed rectification is out of all proportion to the benefit to be obtained: Ruxley Electronics & Construction Ltd v Forsyth (1966) a AC344 and,
8. The NSW Court of Appeal in Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462 per Ipp JA at 120. In my view, the quantification expressed in Bellgrove v Eldridge at 618 (namely, that the rectification work must be a reasonable course to adopt) is aimed at determining whether the cost of remedying the defect is out of proportion with achievement of the contractual objective.
9. In Brewarrina v Beckhouse Civil Pty Ltd [2006] NSWCA 361 (15 December 2006 Tobias JA (with whom Giles and McColl JJA agreed), after reviewing the above authorities drew from them at [89] the following; In summary, the authorities to which I have referred stand for the proposition that whether the rectification work is a reasonable course to adopt is dependant upon a finding of fact that the proposed work was reasonable in order to achieve the commercial objective. The rectification work would be unreasonable if it was out of all proportion to the achievement of that objective or to the benefit to be obtained there from.

Item 159-Damage to the Neighbour's Property

1. This head of claim derives from Mr Atherton's evidence at paragraphs 89-95, 302-306 and 1057-1058 of the Statement of Trevor Atherton dated 19 August 2013 indicate that repairs have been carried out to the adjoining properties on both sides but neither are satisfied with the results and both remain hostile and uncooperative.
2. Mr Kelly has estimated the costs of the work involved based upon the description contained in Mr Atherton's first statement in relation to both properties. Mr Beenke could not find sufficient description of the works to estimate the cost of repairs.
3. It has been submitted by the owners that there is a remaining contingent liability for the homeowners and although it is difficult to quantify allowance should be made in accordance with the established principles: The Commonwealth of Australia v Amann Aviation Pty Limited (1992) 174 CLR 64 F.C 91/043 High Court of Australia. Mason CJ and Dawson J: "31. The settled rule both here and in England, is that mere difficulty in estimating damages does not relieve a court from responsibility of estimating them as best it can.
4. The work described by Mr Atherton involves some brickwork and timber fencing the extent of which is not quantified.
5. There is a lack of evidence as to the precise claims that the neighbours are said to be making. Mr Atherton has provided email correspondence with the neighbours which supported his claim in relation to damage to the adjoining properties, but despite the efflux ion of time neither of the neighbours have commenced any action to recover the cost of the alleged damage.
6. The builder in oral evidence reported on remedial works to one of the adjoining properties and this evidence was unchallenged.
7. There is no calculation to support the costs propounded by Mr Kelly and I find that there is no reliable evidence on which to estimate the possible damages. I make no allowance in relation to this head of claim.

Item 27 Absence of Warranties

1. The owners have claimed $10,160.00 for diminution in value of the property as a consequence of the builder's failure to warrant the work which he has completed. The quantum is arrived at based upon a formulation by Mr Kelly which appears to be fundamentally flawed because it is based upon a percentage of the contract sum.
2. The experts Whitton and Beencke were not familiar with the formula and Mr Beencke has pointed out that even if such a formula applied it should not apply to the entire contract sum because more than 1/3 of that (PC and Provisional items) were removed from the contract by the owners.
3. It is also notable that much of the warranted work such as water proofing plumbing and the like has been re-done by the owners' new contractor thereby voiding the initial warranties and introducing new ones.
4. It has also been pointed out in the builder's submissions that the builder is ready willing and able to provide warranties and will do so if ordered by the Tribunal.
5. I accept the builder's submission that in any event these works are covered by Statutory Warranties implied into every home building contract which have a currency of 7 years.
6. I am persuaded that this is an appropriate course in the circumstances and I will include orders that the builder provide to the owners such warranties as are in his care and control.

Item 28 Diminution in Value for the absence of As-Built Plans

1. When the builder's contract was terminated by the owners the works had not reached a stage where as-built drawings could be provided.
2. The builder has nevertheless agreed that the cost of provision of the "as executed" plans is $1,920.00 and I find for the owners in that sum.

Item 29. Diminution in Value resulting from the absence of Certificates and Documentation

1. This issue is similar to that already determined in item 27 above. I find that the same order should apply to all documents or certificates in the builder's care and control. I note also that many of the original certificates, which are not required before practical completion, would have been rendered invalid by the rectification and completion works carried out by Mr Atherton.
2. I also find that the basis upon which Mr Kelly has calculated the costs of providing the certification is flawed in its assumption that the builder is unable to provide certification and that the time allowed to prepare them is excessive.
3. I accept the builder's submission that the owners have failed to establish this defect and have failed to provide a proper foundation to quantify the alleged loss. I dismiss this claim and make no allowance under this head.

Item 31 - Liquidated Damages

1. Under this head of claim but subsequently revised the quantum to $28,000.00 representing 28 weeks delay to the completion of the works before the termination of the contract with T M Building.
2. The supplementary condition 46 provides the following under the Liquidated Damages Head. A If the works have not reached completion within the time fixed in clause 6 of the Home Building Contract plus any extension granted under clause 7 of the Home Building Contract, the owner ahll be entitled to claim liquidated damages at the rate of $1,000.00 per week. B Liquidated damages may be deducted from any amount due from the owner to the contractor
3. The builder has submitted that the wording of the Supplementary Condition is instructive in the sense that it provides an entitlement to claim liquidated damages. It is submitted that the clause falls short of creating an absolute right to the damages.
4. The builder says that the legal principle is established in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at [9-12] citing with approval Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor co Ltd [1915] AC 79, 86-87.
5. It is accepted that a contract can stipulate a sum payable by way of damages in the event of its breach provided it is a genuine pre-estimate of the damages to which the innocent party would be entitled under the general law.
6. The question, the builder submits, "…as to whether a sum stipulated is a genuine pre estimate of damages or a penalty is to be judged as at the time of the making of the contract."
7. "It will be a penalty if the sum stipulated for the breach is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach (Dunlop Pneumatic Tyre Co Ltd ).
8. It is insufficient that it should be lacking in proportion. It must be out of all proportion." (Ringrow Pty Ltd).
9. It falls to the builder to prove that clause 46 is a penalty and evidence of negotiations leading to the insertion of the liquidated damages clause is relevant and admissible in the determination of whether it is a penalty (Multiplex Constructions Pty ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 507 -513 per Cole J.).
10. It is submitted that notwithstanding that Mr Atherton has provided two detailed and extremely long affidavits totalling nearly 1500 paragraphs there is no evidence at all to establish that the owners have in fact suffered any loss as a consequence of the delay in bringing the work to a conclusion.
11. It appears that the only evidence provided by Mr Atherton to explain the inclusion of the liquidated damages clause is that he pasted additional clauses from the RAIA MBA ABIC SW1 building contract to cover matters not included in the Home building Contract.
12. At the time the parties entered the contract it was clear that Mr and Mrs Atherton and their son Peter would continue to occupy the premises and conduct their respective businesses from there.
13. They did and as noted no evidence of any financial loss as a result of delays to completion has been provided in a manner which would enable the contract administrator, who incidentally was Mr Atherton, to determine the application for liquidated damages in favour of the owners.
14. In relation to Mr Atherton's assertion that there was agreement at the first conclave in relation to the initial claim for $50,000.00 it was noted that Mr Atherton was not a participant at the conclave and counsel for the owners agreed at the hearing that the owners would not rely on the assertion in terms of the quantum or the asserted agreement.

The Concrete Garage Paving Slab

1. The builder claims in quantum-meruit for the cost of the slab which was installed in order to alleviate future water reticulation through the rock base at the garage.
2. There is no issue that the work was extra to the contract and that it has been performed the only matter of debate between the parties is the value of the work done. Mr Atherton was aware that the builder expected to be paid for extra work. (Liebe v Molloy (1906 $ CLR 347).
3. Mr Atherton's evidence is that the parties agreed verbally that the work would proceed in order to assist the builder and that $2,000.00 was the value of the work.
4. The experts agreed that the value of the work was of the order of $5,500.00 and this has been established by the application of contract rates, which were exposed in the contract for the purpose of calculating variations to the work.
5. It was submitted by the owners that it was unlikely that Mr Atherton would leave himself exposed to an open ended agreement as to the value of the work.
6. The builder again points to the thoroughness displayed by Mr Atherton in recording the most minute details of the work and observes that in relation to this item not one note or other single piece of objective evidence of the agreement can be found.
7. I find that Mr Atherton was aware of the rates labour rates applying to this item and could be expected to have formed a view as to the reasonable cost of this work which on any assessment exceeds $2,000.00.
8. I have not accepted the possibility that the work was carried out to assist the builder and might therefore have been discounted to reflect that.
9. I find for the builder in relation to this item in the sum of $5,500.00 which I conclude is the value of this work in the hands of the receiver.

Contract Reconciliation: Item No, Description Amount

1. Contract Sum $461,818.18
2. Provisional Sums -$ 51,633.75
3. Prime Cost Items -$112,124.25
4. Excavation $ 16,859.00
5. Revised Contract Sum $ 314,919.27
6. Variation 1. $ 1,363.64
7. Variation 2. $ 5,538 .18
8. Variaition 3. $ 1,606.36
9. Variation 4. $ 7,666.82
10. Amendment 1. $ 42,000.00
11. Variations 5 & 6. $ 6,615.00
12. Variation 7. $ 5,500.00 13A. Total Variations $ 70,290.00
13. Variation 8. -$ 13,789.20
14. Net variations $ 56,500.80
15. Adjusted Contract Sum $ 371,419.27 17A. Works by owners -$ 72,147.73
16. Less works remaining to complete -$ 3,071.27
17. Less remaining defective works -$ 79,720.80
18. Less Value of neighbours' claims $ Nil.
19. Value of completed works $ 288,628.00 Plus GST $ 28,862.80 22 Value of completed work $ 317,490.80 23 Less paid on account of the contract -$ 252.448.00 24 Less paid on account of Variations -$ 68,886.00
20. Total due to builder $ 3,843.20.
21. The orders should be that the owners pay to the builder the sum of $3,843.20 within 30 days of the publication of these orders.
22. The builder is to provide to the owners, within 14 days of the publication of these orders, all certificates and warranties in his possession or control. I note that payment of the sum ordered is not conditional upon the builder providing the certificates.
23. The parties are to apply to the registry to be heard on costs or if agreed to provide written submissions in relation to the issue of costs.

Civil and Administrative Tribunal of New South Wales

17 October 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 March 2015